In re Manville Forest Products Corp.

• Citation: 225 BR 862
• Decision Date: 13 October 1998
• Docket Number: Bankruptcy No. 82 B 11659 (BRL),Adversary No. 98-8379A.
• Parties: In re MANVILLE FOREST PRODUCTS CORPORATION, Reorganized Debtor. RIVERWOOD INTERNATIONAL CORPORATION, Plaintiff, v. OLIN CORPORATION, Defendant.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

225 B.R. 862 (1998)

In re MANVILLE FOREST PRODUCTS CORPORATION, Reorganized Debtor.

RIVERWOOD INTERNATIONAL CORPORATION, Plaintiff, v. OLIN CORPORATION, Defendant.

Bankruptcy No. 82 B 11659 (BRL), Adversary No. 98-8379A.

United States Bankruptcy Court, S.D. New York.

October 13, 1998.

Lowell Gordon Harriss, Davis, Polk & Wardwell, New York City, for Reorganized Debtor-Plaintiff.

Saul Burian, Kramer, Levin, Nessen, Kamin & Frankel, New York City, for Defendant.

DECISION GRANTING MOTION FOR SUMMARY JUDGMENT

BURTON R. LIFLAND, Bankruptcy Judge.

Riverwood International Corporation ("Riverwood" or "Debtor"), formerly known as Manville Forest Products Corporation ("MFP"), a confirmed chapter 11 debtor, commenced this adversary proceeding against Olin Corporation ("Olin") seeking declaratory relief and damages relating to claims arising from pre-petition indemnification agreements executed in 1967 and 1974 that were allegedly discharged by MFP's confirmation.

BACKGROUND

In 1966, Olin incorporated Olinkraft, Inc. ("Olinkraft") as a wholly-owned subsidiary. In 1967, Olin transferred the assets of its forest product division to Olinkraft and in exchange obtained, inter alia, an indemnification provision (the "Indemnification Provision") providing that:

Olinkraft assumes and agrees to pay, perform and discharge, and to save Olin harmless with respect to, and at Olinkraft\'s expense to defend any actions brought in connection with, all debts, obligations, contracts and liabilities of Olin with respect to such Division of every kind, character and description, whether accrued, absolute, contingent or otherwise. . . .

Among the assets transferred to Olinkraft was certain real property operated by Olin's forest products division, (the "Plant 94 Site") located in Louisiana. In 1974, Olin spun-off Olinkraft into a public company following which both Olin and Olinkraft executed an Indemnification Letter Agreement (the "Indemnification Letter" and together with the Indemnification Provision, the "Indemnity Agreements"). The Indemnification Letter provided Olinkraft would:

indemnify and save Olin, its successors and assigns, harmless with respect to, and at Olinkraft\'s expense to defend any action brought against Olin, its successors and assigns, in connection with (i) all guarantees, indemnities and undertakings by Olin . . . (ii) all claims, obligations and liabilities of any kind, including matters now and hereafter in litigation, which may be asserted against or imposed on Olin in respect of Olinkraft. . . .

The Indemnification Letter also provided that "the assumptions by Olinkraft contained in the Indemnification Provision from Olin to Olinkraft . . . are hereby reaffirmed by Olinkraft."

In 1979, Olinkraft merged into JM Capital, a wholly-owned subsidiary of Johns-Manville Corporation and, subsequently, Olinkraft changed its name to Manville Forest Products. MFP filed a petition for relief under chapter 11 of the United States Bankruptcy Code (the "Code") in 1982. This court set December 29, 1983 (the "Bar Date") as the last date to file pre-petition claims against the Debtor's estate. Notably, Olin was involved in MFP's bankruptcy case filing a notice of appearance and a proof of claim in the amount of $7,500,000 based on its pro rata share of tax liability incurred before the spin-off. The contribution tax claim was settled and paid but at no time did Olin file a proof of claim based on the Indemnity Agreements.

MFP's First Amended and Restated Plan of Reorganization ("Plan") was confirmed by order dated March 26, 1984 ("Confirmation Order"). The Confirmation Order provided that "the Debtor is discharged and released from any and all unsecured debts which arose before the date of confirmation of the Plan, . . . and any and all debts of a kind specified under §§ 502(g), 502(h), or 502(i) of the Code whether or not . . . a proof of claim based on such debt is filed. . . ." Conf. Order ¶ 4. The Confirmation Order further mandates that "all creditors and equity security holders of the Debtor or other entities whose debts are discharged or whose rights and interest are terminated by the Plan and the Confirmation Order are individually and collectively permanently restrained and enjoined from instituting or continuing any action or employing any process to collect such debts or pursue such interests as liabilities or obligations of the Debtor or the Reorganized Debtor or its successors." The Plan provided that "the Debtor shall be deemed discharged from any debt, except as provided in this Plan, which arose before the Confirmation Date and any debt of a kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code whether or not . . . a proof of claim based on such debt has been filed." Plan III.A. ¶ 1. Following confirmation, MFP changed its name to Riverwood International U.S.A., Inc. and has since changed its name to its present designation.

In 1996, the State of Louisiana Department of Environment Quality ("LDEQ") sent demand notices to Olin and Riverwood for remediation as potentially responsible parties ("PRP") for the Plant 94 Site pursuant to the Louisiana Environmental Quality Act ("LEQA"). As a result, Olin sent a demand letter to Riverwood seeking indemnification arising under the Indemnity Agreements for the Plant 94 Site remediation.

Riverwood now moves for partial summary judgment seeking an order determining that any claim arising under the Indemnity Agreements was discharged by the Confirmation Order. Olin argues in response that, because LEQA was not enacted until four months after confirmation, its demand for indemnification did not constitute a claim within the definition of section 101(5) of the Code and, thus, was not discharged. Additionally, Olin seeks an order declaring that its demand for indemnification was not barred by the Confirmation Order which I treat as a cross-motion for summary judgment.

DISCUSSION

Federal Rule of Civil Procedure 56(c) ("Federal Rule"), made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure ("Bankruptcy Rule") 7056, provides that summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1223 (2d Cir.1994).

Summary judgment is appropriate if, in light of the evidence presented, there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Both parties and the court recognize the appropriateness of summary judgment in this case as neither party alleges any material facts in dispute.¹

Section 1141(d)(1) of the Code provides:

Except as otherwise provided in this subsection, in the plan, or in the order confirming the plan, the confirmation of a plan —

(A) discharges the debtor from any debt that arose before the date of such confirmation, and any debt of a kind specified in section 502(g), 502(h) or 502(i) of this title, whether or not —

(i) a proof of the claim based on such debt is filed or deemed filed under section 501 of this title;

(ii) such claim is allowed under section 502 of this title; or

(iii) the holder of such claim has accepted the plan; and

11 U.S.C. § 1141(d)(1) (1994). With certain exceptions not relevant to these facts, confirmation will discharge the debtor from any debt that arose pre-petition. Id. Section 101(12) of the Code provides that a "debt" is a "liability on a claim." 11 U.S.C. § 101(12) (1994). This definition reveals that Congress intended that the meanings of "debt" and "claim" be coextensive. Pennsylvania Dep't of Public Welfare v. Davenport, 495 U.S. 552, 552, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990). See also H.R.Rep. No. 95-595, 310 (1977), U.S. Code Cong. & Admin.News 1978 pp. 5963, 6267; S.Rep. No. 95-989, 23 (1978), U.S. Code Cong. & Admin.News 1978 pp. 5787, 5809. As intended by § 1141 of the Code, confirmation will discharge all claims whether such claim was allowed, liquidated, or a proof of claim was filed. See 11 U.S.C. § 1141(d)(1) (1994); Sure-Snap Corp. v. State St. Bank and Trust Co., 948 F.2d 869, 873 (2d Cir.1991); In re U.S.H. Corp. (Grant v. U.S. Home Corp.), 223 B.R. 654, 657 (Bankr.S.D.N.Y.1998). A claim arising from a pre-petition, non-executory contract is similar to any other pre-petition claim and would be discharged by confirmation. See Heming-way Transport, Inc. (Woburn Associates v. Kahn), 954 F.2d 1 (1st Cir.1992); Denton & Anderson Co. v. Induction Heating Corp., 178 F.2d 841 (2d Cir.1949). Thus, generally any claim Olin may assert based on the Indemnity Agreements would be discharged by confirmation. However, Olin does not argue that its Indemnity Agreements claim survives confirmation, instead, it argues that it did not have a claim and, therefore, the Confirmation Order, Plan and section 1141(d) of the Code did not discharge its rights.

The central issue in this adversary proceeding is whether the indemnification rights Olin obtained under the Indemnity Agreements constituted a pre-petition claim. Section 101(5)(A) defines a "claim" as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured." 11 U.S.C. § 101(5)(A) (emphasis added). Congress altered the definition of "claim" when it enacted the Code. In explaining the intended definition of "claim" under the Code, the House and Senate Reports provide "by this broadest possible definition of claim . . . all legal obligations of the debtor, no...